In a matter of first impression, the Court of Appeals has handed No-Fault self-insurers a major victory. In an appeal briefed and argued by Jones Jones’s own Agnes Neiger, the Court of Appeals held that No-Fault actions against self-insurers are subject to a three-year statute of limitations. The decision paves the way for dismissal of pending actions filed beyond the three-year limitation period and should dissuade claimants and medical providers from attempting to litigate stale claims in the future. By reducing the time plaintiffs can wait before litigating or arbitrating claims the decision also reduces self-insurers’ potential exposure to statutory interest.
On appeal to the Court of Appeals, the Transit Authority argued that the three-year statute of limitations applied because the obligation to provide No-Fault benefits is a liability created by statute and as a self-insurer the Transit Authority’s obligation to provide No-Fault coverage would not exist but for the provisions of the Vehicle and Traffic Law and Insurance Law. The plaintiff put forward several arguments in support of its position that the six-year limitations period should apply, including arguments that because insurers and self-insurers are subject to the same substantive liabilities under the No-Fault law they should likewise be subject to the same statute of limitations, that the obligation to provide No-Fault coverage is “contractual in nature” even where there is no actual insurance policy issued, that the Transit Authority implicitly contracts to provide No-Fault benefits, and that in obtaining a certificate of self-insurance, self-insurers enter into a contract with the State under which they are required to provide coverage to injured parties. The Court of Appeals agreed with the Transit Authority and held:
“The no-fault benefits in dispute are not provided by a contract with a private insurer. Instead defendant has met its statutory obligation by self-insuring. No-fault is a creature of statute (see Aetna Life Ins. Co. v Nelson, 67 NY2d 169, 175  [‘the No-Fault law does not codify common-law principles; it creates new and independent statutory rights and obligations in order to provide a more efficient means for adjusting financial responsibilities arising out of automobile accidents’]). Our holding in Aetna Life Ins. Co. is directly applicable here. As we stated in that case, ‘first-party benefits are a form of compensation unknown at common law, resting on predicates independent of the fault or negligence of the injured party’ (id. at 175). In the absence of private law requiring defendant to pay first-party benefits (that is, in the absence of a contract for insurance), the only requirement that defendant provide such remuneration to the assignee as a result of the accident appears in relevant parts of the Vehicle and Traffic Law and the Insurance Law. Consequently, the source of this claim is wholly statutory, meaning that the three-year period of limitations in CPLR 214 (2) should control this case.”
The Court of Appeals’ decision resolves a split that has existed between the First and Second Departments of the Appellate Division and definitively establishes that No-Fault actions against self-insurers are subject to a three year statute of limitations. Accordingly, pending actions against self-insurers that were filed beyond the three year limitation period are subject to dismissal, and future actions must be filed within three years of the claims becoming overdue, thereby reducing the number of claims eligible for litigation or arbitration, limiting the amount of interest that can accrue on overdue claims prior to the commencement of an action, and ensuring that self-insurers have an opportunity to defend claims before they become stale.
Read about this case in the New York Law Journal here.